If you missed the headline yesterday, The Block reported that the CME Group is sharing details on bitcoin options that could signal an ‘imminent’ product launch. Although there was not too much detail within this article regarding product specs, we at BitOoda are confident that BTC options being launched on a major US exchange will happen by Q4 of this year. One of our core businesses here at BitOoda, our NFA register Introducing Broker, Ooda Commodites, has been in position to capitalize on this advancement within the crypto space for over a year now. To date, we have had success brokering bilateral deals in BTC and ETH options, as well as developing structured products specifically for miners. We believe this leap from bilaterally traded options to listed options will add liquidity, tighten the bid-ask on options prices, and most of all, reduce credit risk i.e. margin requirements usually seen within bilateral ISDA’s/CSA’s.
Back in early June, we wrote a piece called ‘Blocking’ CME Futures Spreads. In this piece, we went over the process of how Ooda Commodites can act as your broker and ‘Block’ exchange listed futures for our clients. Whether it be on CME or Bakkt, you will need a Futures Commission Merchant (FCM) to trade these futures or options products. Since this is new and evolving asset class, there are a select few FCM’s that are currently comfortable with bitcoin futures and crypto in general. If you would like our team to help review your listed derivatives needs, we would be happy to advise on the best FCM to go with for your specific trading style and make those proper introductions. Once a client has successfully onboarded with an FCM, you would ask said FCM to permission Ooda Commodites to Block trades through CME Clearport or ICE Block and away we go.
Finally, we have some thoughts on the effect a listed option launch would create. If anything, we see this development as a liquidity infusion for more players in the investing world to get access into the digital asset class. Our hunch, is that at the beginning of a launch (similar to the launch of ICE Bakkt Futures later this month) there may be some initial ‘price-discovery’ or volatile price action. In that case, GAMMA would be a buy. After the market settles down post launch, we feel that price moves for BTC will become less ‘gappy’ and over time realized vol will lessen, and in turn implied vol will have a slightly lower range. We are definitely curious as to what our readers think on this topic and would love to engage in these conversations if you want to pick our brains.
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